10-Q/APeriod: Q2 FY2002

CME GROUP INC. Quarterly Report (Amendment) for Q2 Ended Jun 30, 2002

Filed September 26, 2002For Securities:CME

Summary

CME Group Inc. reported solid financial performance for the six months ended June 30, 2002, driven by a significant increase in trading volume across its various product areas. Net income for the period rose to $41.7 million, up from $36.7 million in the prior year's comparable period, reflecting strong revenue growth offset by moderate expense increases. The company benefited from increased market volatility and customer demand for risk management products, leading to record trading volumes, particularly in equity and interest rate contracts. The company also highlighted a substantial increase in electronic trading, with GLOBEX volume nearly doubling year-over-year. Despite this growth, revenue per contract saw a slight decrease due to volume discounts and fee limits aimed at stimulating activity. Management focused on investing in technology and infrastructure, evidenced by increased depreciation and amortization expenses. The company maintained a strong liquidity position, supported by operating cash flows, and successfully managed its capital resources, including the payment of a special dividend.

Key Highlights

  • 1Net income increased to $41.7 million for the six months ended June 30, 2002, up from $36.7 million in the same period of 2001.
  • 2Total revenues increased by 15.9% to $217.1 million for the six months ended June 30, 2002, driven by a 36.7% rise in average daily trading volume.
  • 3Clearing and transaction fees, the primary revenue driver, increased by 16.5% to $162.2 million, despite a decrease in the average rate per contract.
  • 4Electronic trading via GLOBEX saw substantial growth, with average daily volume increasing by 104.7% for the six-month period.
  • 5Operating expenses increased by 11.0% to $139.6 million, largely due to higher salaries, benefits, and technology-related expenses.
  • 6The company paid a special cash dividend of $0.60 per share ($17.3 million total) in June 2002.
  • 7Cash and cash equivalents decreased to $48.1 million from $69.1 million, primarily due to the dividend payment.

Frequently Asked Questions

The primary driver of revenue growth is a significant increase in trading volume across all product areas, up 36.7% year-over-year for the six months ended June 30, 2002. This increased volume translates directly into higher clearing and transaction fees.

Total operating expenses increased by 11.0% to $139.6 million for the six months ended June 30, 2002. Key drivers of this increase include higher salaries and benefits, increased professional fees for technology initiatives and litigation, and higher depreciation and amortization expenses due to technology investments. Notably, stock-based compensation expense decreased significantly.

The company restated its financial statements for the six months and three months ended June 30, 2002 and 2001, primarily due to a change in the accounting for a stock option granted to the CEO. This restatement has been applied retroactively and impacts reported net income and earnings per share, generally increasing them for the periods presented.

CME Group maintained a healthy liquidity position, with cash and cash equivalents of $48.1 million at June 30, 2002. The decrease from the prior year-end was mainly due to the payment of a special dividend. The company also has a $500 million line of credit, which has not been utilized.